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what is PMI


Are you deducting your mortgage PMI from your taxes?

One of the positives to come out of the fiscal cliff fiasco is the reinstating of the deduction for PMI insurance premium for calendar year 2012 and 2013.

If you, like most people today, put down less than 20% on your house, you were required to purchase Private Mortgage Insurance (PMI) which protects the lender in the event you default on the loan. Although viewed negatively, this feature allows aspiring home buyers -- especially first time buyers -- that don't have the 20% to put down to obtain a mortgage.

However, there is an option starting with loans in 2007, and continuing now through 2013, allowing you to deduct each year's premiums paid on PMI for your principal residence and for a non-rental second home.

There are restrictions that your tax advisor can review and in order to claim, you must itemize your return. However, it could save you money in the long run. Speak to a tax advisor before you file your taxes this year to see if you qualify.